Oil steadies as China imports rebound but glut weighs

Brent crude was up by 3 cents, or 0.1%, to $29.75 a barrel 0341 GMT, after dropping 4% on Wednesday. US West Texas Intermediate futures gained 4 cents, or 0.2%, to 24.03 a barrel, after declining more than 2% in the previous session.

US crude inventories were up for a 15th straight week last week, rising by 4.6 million barrels, the Energy Information Administration said on Wednesday. (File photo)

Oil prices steadied on Thursday as data showed China’s crude imports rebounded, but market watchers expect gains to be capped by the glut in supplies as the coronaviruspandemic crushes global fuel demand.

Brent crude was up by 3 cents, or 0.1%, to $29.75 a barrel 0341 GMT, after dropping 4% on Wednesday.

US West Texas Intermediate futures gained 4 cents, or 0.2%, to 24.03 a barrel, after declining more than 2% in the previous session.

Both contracts traded in an out of negative territory through the Asian morning on light trade with some markets on holiday.

Oil prices were supported by data showing Chinese crude imports rose last month. Imports climbed to 10.42 million barrels day (bpd) in April from 9.68 million bpd in March, according to Reuters calculations based on customs data for the first four months of 2020. Overall exports from China also rose against expectations of a sharp drop.

“Oil prices should eventually settle on a wide $10 range, with WTI crude’s upper boundary being around the $30 a barrel level, while Brent crude targets the $35 a barrel level,” said Edward Moya, senior market analyst at OANDA.

While prices have risen since late April as some countries have started easing lockdowns put in place to combat the worst pandemic in a century, oil continues to be pumped into storage, leaving a massive mismatch between demand and supply.

US crude inventories were up for a 15th straight week last week, rising by 4.6 million barrels, the Energy Information Administration said on Wednesday.

That was less than analysts had forecast in a Reuters poll, which suggested a 7.8 million-barrel rise, but the gain highlighted once again how much supply is being stored.

Distillate inventories also rose sharply.

Gasoline stocks, however, fell for a second week as some US states eased lockdowns that had sharply hit traffic.

“The latest report (on US inventories) added to tentative evidence that – after a catastrophic few weeks – the pressure on the US oil market is beginning to lessen,” Capital Economics said in a note. “That said, we wouldn’t rule out more turbulence in the coming weeks.

“There are also signs that some oil producers are struggling to comply with an agreement between the members of the Organization of the Petroleum Exporting Countries (OPEC) and other suppliers, including Russia, to cut output by a record amount.

Iraq, OPEC’s second-largest producer after Saudi Arabia, has not yet informed customers of impending restrictions on its oil exports.

OPEC and allied producers – a grouping known as OPEC+ – agreed to cut production from May 1 by around 10 million bpd to stabilise prices amid the plunge in demand in economies ravaged by the coronavirus outbreak.